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Calvin Reid -- 6/12/00
Barnesandnoble.com Grabs Stake in MightyWords,
Plus Content Distribution Pact

Continuing to build its e-publishing presence and to expand its ownership of content, Barnesandnoble.com has taken a $20-million, 25% stake in the e-publishing Web site MightyWords.com, which is being spun off as an independent firm by its parent company, online computer book retailer Fatbrain.com. BN.com's investment is supplemented by funding from three venture-capital firms, including $10 million from billionaire technologist Paul Allen's Vulcan Ventures and another $6 million from two other firms. As part of the investment agreement, MightyWords.com will use BN.com to distribute its digital inventory of downloadable texts by both well-known and unknown authors.

Fatbrain.com launched MightyWords.com in March to distribute content from its e-matter digital publishing program--short texts, 10-100 pages, in a secure electronic form (PDF files) that could be purchased online, downloaded and printed out if desired. Now the firm will use this $36 million in an initial investment to set up MightyWords.com as an independent company, according to Chris MacAskill, founder of Fatbrain.com. "By September, we'll have new office space somewhere in the Silicon Valley area." MacAskill will join the new firm as its CEO, and Dennis Capovilla, formerly COO at Fatbrain, has been promoted to CEO. The new company will initially have 24 employees.

In addition to BN.com's 25% stake in MightyWords; Fatbrain.com will retain a 23% stake; the three venture-capital firms will own about 20% combined; and the balance is owned by MightyWords and its employees.

Steve Riggio, CEO of BN.com, described MightyWords.com "as the next generation of valuable Internet content." He told PW that MightyWords' content will be "integrated into the BN.com database." Asked whether B&N was becoming as much a publisher as retailer, Riggio told PW, "Anyone in the book business knows that Net convergence means transmitting and selling content. In the future, we expect that authors will sometimes be publishers; booksellers will be publishers; and some publishers will turn to retail. Ultimately, it means the democratization of publishing and a vibrant marketplace." This is BN.com's latest content investment and follows its taking a minority stake in notHarvard.com, an online educational community, earlier this month, and a 49% investment in print-on-demand subsidy publisher iUniverse.com in February.

MacAskill described Fatbrain.com as a B2B company that "leverages digital publishing initiatives for business customers," and explained that "a significant opportunity also exists for the mass market, and one company can't do both well. Now both Fatbrain.com and MightyWords.com can move forward with clarity." Currently, MightyWords.com offers more than 10,000 individual e-texts in a wide variety of categories.

MacAskill told PW that MW will continue to focus on short works while "looking to provide the infrastructure for providing content to e-tailers." He said the distribution arrangement with BN.com will be more than a simple hyperlink between the sites. "BN.com will be able to sell MightyWords' e-content directly off the BN.com site." He also stressed that "once we've finished structuring our BN.com channel, we'll be looking for new distribution partners."

Fatbrain's Capovilla emphasized that in addition to computer-book retailing online, Fatbrain.com will focus on "creating online information stores" for companies; publishing company-generated information in print-on-demand paper as well as digital form; and providing companies with digital and hard copy fulfillment infrastructures. "MightyWords is after mass market writers and aspiring writers," said Capovilla. "Fatbrain is after organizations. Their employees will be our customers." FatBrain.com will also continue to run two "very profitable" bricks-and-mortar stores in Silicon Valley.
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